Apr. 18, 2013

Cheryl Perkins

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Credit cards have been around for 50 years or more, and over that time, in many ways they have become part of the fabric of American life.

As with everything else today though, technology is bringing about changes to the ubiquitous use of these plastic cards. The concept of credit still lives on, but the way it is delivered is changing.

Even before the start of the computer age, credit cards started the move toward a cashless society. But now with the addition of payment applications on mobile phones, electronic banking, debit cards, alternative means of online payment like PayPal, and new technology like RFID chips and key fobs, the credit card is under pressure. These new electronic payments methods can be more secure and save time while still reducing the hassle of cash transactions or even credit card purchases.

With the popularity and ease of using credit cards, the more they have been targeted for fraud. We have all heard stories of people who have seen thousands of dollars of fraudulent card activity pile up overnight. It is too easy to either forge the cards, or even just obtain a charge number to make online purchases.

Credit cards losses due to fraud are in the billions of dollars, and sometimes it seems that these thefts are so rampant that the losses are just considered to be a cost of doing business.

The conventional card has been evolving rapidly. First to smartcards with embedded electronic chips rather than magnetic stripes, but that is something that still must be carried around. However, these cards are much harder to counterfeit, and fraud of these cards is dramatically lower than with conventional plastic.

The key to the foreseeable future of credit or debit purchases is of course likely the smartphone. Last year for example Starbucks launched a mobile application that allows consumers to make purchases easily using their phone. You open the app, click on the pay button, and a 2-D bar code comes up that is waved in front of a scanner.

The cost is deducted from you Starbucks account and the remaining balance is shown. It takes only a few seconds for the whole process. It is so easy and simple it has become my preferred method of payment.

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The next step beyond optical approaches like that used by the Starbucks app are near-field communication (NFC) devices, or RFID devices that donít even need to be scanned, just be physically present. RFID devices are similar to the electronic EZ-Pass transmitters that have been implemented on toll roads for many years, but are carried around personally or embedded into smartphones.

NFC devices are shorter range, which of course has security advantages. It is forecast that by next year a significant number of NFC-capable smartphones will be available in the marketplace. You will be hearing much more about this technology soon.

Of course fraud and security for these new devices will evolve in a game of cat and mouse. So hang on to your cellphones, as they become not only your communication lifeline, but also your wallet too.

ó Cheryl Perkins is the president/founder of Innovationedge, and former senior vice president and chief innovation officer at Kimberly-Clark Corp. Check out Cherylís blog at www.Innovationedge.com.